South Korean Won nears four-month highs despite the KOSPI index selloff
The South Korean Won (KRW) extends gains for the second consecutive day against the US Dollar (USD), and is set for a 6.5% monthly rally. Strong South Korean macroeconomic data and market expectations of monetary tightening by the Bank of Korea have offset the KOSPI Index’s sell-off.
South Korean KOSPI dropped more than 12% during Wednesday’s session, following a 10% decline on Tuesday, which prompted authorities to halt trading for 20 minutes for the second consecutive day. The Index is 6.4% down at 5,638 at the time of writing, and about 35% down in July, as concerns about overinvestment in Artificial Intelligence (AI) have triggered a sharp correction in tech stocks.
Finance Minister Koo Yun-cheol has pledged new market stabilisation measures, including regulation related to single-stock leveraged ETFs, as experts raised their voices about the exacerbated market volatility caused by some financial products.
The KRW, however, is coping surprisingly well with the stocks' rout. South Korean Gross Domestic Product (GDP) beat expectations with a 0.6% growth in the second quarter while inflation surged to a 30-year high of 3.2% in June. In this context, the Governor of the Bank of Korea (BoK), Shin Hyun-song, has reaffirmed his commitment to further monetary tightening, which is underpinning the recent Won rally.
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